Correlation Between Hertz Global and Socket Mobile

Can any of the company-specific risk be diversified away by investing in both Hertz Global and Socket Mobile at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hertz Global and Socket Mobile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hertz Global Holdings and Socket Mobile, you can compare the effects of market volatilities on Hertz Global and Socket Mobile and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hertz Global with a short position of Socket Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hertz Global and Socket Mobile.

Diversification Opportunities for Hertz Global and Socket Mobile

0.83

Correlation Coefficient

Hertz Global  Socket Mobile

Very poor diversification

The 3 months correlation between Hertz and Socket is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and Socket Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Socket Mobile and Hertz Global is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hertz Global Holdings are associated (or correlated) with Socket Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Socket Mobile has no effect on the direction of Hertz Global i.e., Hertz Global and Socket Mobile go up and down completely randomly.

Pair Corralation between Hertz Global and Socket Mobile

Considering the 90-day investment horizon Hertz Global Holdings is expected to under-perform the Socket Mobile. In addition to that, Hertz Global is 1.26 times more volatile than Socket Mobile. It trades about -0.04 of its total potential returns per unit of risk. Socket Mobile is currently generating about 0.0 per unit of volatility. If you would invest  193.00  in Socket Mobile on October 21, 2024 and sell it today you would lose (44.00) from holding Socket Mobile or give up 22.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Hertz Global Holdings  vs.  Socket Mobile

Hertz Global Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hertz Global showed solid returns over the last few months and may actually be approaching a breakup point.

Socket Mobile

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Socket Mobile are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward-looking signals, Socket Mobile unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hertz Global and Socket Mobile

The main advantage of trading using opposite Hertz Global and Socket Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hertz Global position performs unexpectedly, Socket Mobile can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Socket Mobile will offset losses from the drop in Socket Mobile's long position.

The idea behind Hertz Global Holdings and Socket Mobile pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.